Economics Dictionary of ArgumentsHome
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| Bimetallism: Bimetallism in economics is a monetary system where two metals, typically gold and silver, are used as legal tender at a fixed exchange rate. It aims to stabilize currency and facilitate trade but can lead to imbalances if market values of the metals diverge, often invoking Gresham's Law. Also see Gresham's Law._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Murray N. Rothbard on Bimetallism - Dictionary of Arguments
Rothbard III 898 Bimetallism/Rothbard: Price control/relative prices: Whenever the State sets an arbitrary value or price on one money in terms of another, it thereby establishes an effective minimum price control on one money and a maximum price control on the other, the "prices" being in terms of each other. >Relative price/Rothbard. Bimetallism: This, for example, was the essence of bimetallism. Under bimetallism, a nation recognized gold and silver as moneys, but set an arbitrary price, or exchange ratio, between them. When this arbitrary price differed, as it was bound to do, from the free-market price (and this became ever more likely as time passed and the free-market price changed, while the government's arbitrary price remained the same), one money became overvalued and the other undervalued by the government. Thus, suppose that a country used gold and silver as moneys, and the government set the ratio between them at 16 ounces of silver : 1 ounce of gold. >Price control/Rothbard, >Gresham’s Law/Rothbard. Rothbard III 899 VsBimetallism: The market price, perhaps 16:1 at the time of the price control, then changes to 15:1. What is the result? Silver is now being arbitrarily undervalued by the government and gold arbitrarily overvalued. In other words, silver is fixed cheaper than it really is in terms of gold on the market, and gold is forced to be more expensive than it really is in terms of silver. The government has imposed a price maximum on silver and a price minimum on gold, in terms of each other. The same consequences now follow as from any effective price control. With a price maximum on silver, the gold demand for silver in exchange now exceeds the silver demand for gold (conversely, With a price minimum on gold, the silver demand for gold is less than the gold demand for silver). Problem: Gresham’s Law: Gold goes begging for silver in unsold surplus, while silver becomes scarce and disappears from circulation. Silver disappears to another country or area where it can be exchanged at the free-market price, and gold, in turn, flows into the country. World: If the bimetallism is worldwide, then silver disappears into the "black market," and offcial or open exchanges are made only with gold. VsBimetallism: No country, therefore, can maintain a bimetallic system in practice, since one money will always be undervalued or overvalued in terms of the other. The overvalued always displaces the other from circulation, the latter being scarce. >Gresham’s Law. Fiat money: Similar consequences follow from such price control as setting arbitrary exchange rates on fiat moneys and in setting new and worn coins arbitrarily equal to one another when they discernibly differ in weight. >Exchange rates/Rothbard._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
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